Foxconn Aiming To Better Apple

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Foxconn Aiming To Better Apple

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The company that could be “a potent symbol of the perks and perils of globalization,” Foxconn, is thinking about something nobody would have imaged some while ago: “It is contemplating life far, far beyond Apple.”

In a report published by The New York Times, Foxconn chairman Terry Gou shared his thoughts about the company’s possible future, as the partnership with Apple now seems to be negatively affecting the company’s revenue.

“Foxconn senses that the Apple aura isn’t as invincible as before,” said Jamie Wang, an analyst at the research firm Gartner. “So they are worried that they need something besides Apple’s business that will allow them to grow.”

“The decline in the business of our partners, such as Apple and Nokia, does affect us,” Simon Hsing, Foxconn’s spokesman said. “We don’t want to just wait for orders. We are actively talking with many clients and asking if they can fully utilize what we make.”

To put that into numbers, Foxconn’s first quarter revenue dropped 19.2% on a year-over-year basis, which was heavily affected by the company’s reliance on Apple, which is estimated to be contributing about 40% of Foxconn’s revenue.

Moving beyond Apple could be tricky, but Terry Gou seems confident that Foxconn has the power to step in front and shift away from making products that other companies design, to developing products of its own.

A possible move could be designing large, flat screen televisions, now that Mr. Gou has invested heavily in Sharp, buying a 37.6% stake in Sharp’s LCD panel factory in Sakai, Japan.

“So what do you do in the meantime after spending about $840 million buying a plant?” said Thompson Wu, an analyst at Credit Suisse. “You just say, I have to decide whether I’m better off making TVs at a discount and make less money incrementally or having manufacturing not doing anything.”

Kirk Yang, managing director of Barclays’ Asia Technology Research, said, “Taiwanese companies will do this all the time.”

“They will sell at loss just to get their foot in the door,” he said. “With larger volume, better scale and more experience, they eventually make a small profit.”

There is a slight issue though: televisions currently represent less than 5% of Foxconn’s business, although it had its moment of success with the 60-inch television set it manufactured. But analysts think the company still needs a large TV customer. Could this be Apple?